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Claris Charged Illinois Sales Tax on FileMaker Software Class Action

How does sales tax work with software, since it sells under different terms, such as licenses? The complaint for this class action alleges that Claris International, Inc. wrongly charges sales tax on its software products. The complaint alleges that Claris has violated Illinois state laws, including the Consumer Fraud and Deceptive Business Practices Act, among other things.

Claris used to be called FileMaker, Inc. and it designed and produced a brand of software called FileMaker. FileMaker software can be licensed in a “canned” form, that is, as “a mass-produced, pre-packaged, mass-marketed product” where all the programs are identical. 

Plaintiff Floradora is a Chicago boutique that sells women’s clothing, gifts, accessories, and home accents. Like many small and medium-sized businesses, it uses Filemaker.

Under the Illinois Administrative Code, canned software is tangible personal property and it is taxable. However, a license for canned software is not taxable if the sale meets five conditions. For example, the first condition is that the sale must include a written, signed agreement.

According to the complaint, the software sale under which Floradora obtained software from Claris met all of these criteria. However, it seems that Claris charged Floradora sales tax in some years and not in others. 

When Floradora took a one-year contract in 2013, Claris charged it sales tax. It appears that when the boutique renewed its license in 2014 and 2016, Claris did not charge sales tax. When it went to renew in 2018, Claris again wanted to charge sales tax.

The complaint claims, “When [Floradora] informed Claris that Illinois law prohibits charging sales tax on the license of canned software under these circumstances, Claris denied that the conduct was illegal and, on information and belief, continues to illegally charge sales tax to licensees.” 

In addition to the violation of Illinois law, the complaint claims that Claris has committed misappropriation and conversion and breach of constructive trust, and that it has unjustly enriched itself.

The class for this action is all persons who, during the statutes of limitation, entered into a written agreement to license canned software from Claris, and to whom Claris charged Illinois sales tax, where the written agreement

  • Restricts the customer’s duplication and use of the software;
  • Forbids the customer from sublicensing or transferring the software to another without the permission and control of Claris;
  • Provides another copy if the customer loses or damages the software, or allows the licensee to make and keep an archival copy; and
  • Requires the customer to destroy or return all copies to Claris at the end of the license period.
Article Type: Lawsuit
Topic: Consumer

Most Recent Case Event

Claris Charged Illinois Sales Tax on FileMaker Software Complaint

August 21, 2019

How does sales tax work with software, since it sells under different terms, such as licenses? The complaint for this class action alleges that Claris International, Inc. wrongly charges sales tax on its software products. The complaint alleges that Claris has violated Illinois state laws, including the Consumer Fraud and Deceptive Business Practices Act, among other things.

claris_sales_tax_on_canned_software_compl.pdf

Case Event History

Claris Charged Illinois Sales Tax on FileMaker Software Complaint

August 21, 2019

How does sales tax work with software, since it sells under different terms, such as licenses? The complaint for this class action alleges that Claris International, Inc. wrongly charges sales tax on its software products. The complaint alleges that Claris has violated Illinois state laws, including the Consumer Fraud and Deceptive Business Practices Act, among other things.

claris_sales_tax_on_canned_software_compl.pdf
Tags: Deceptive Sales Practices, Improper Sales Tax Charges, Sales Tax